Are you buying in while others panic? Can both Yang Zhongli and Shuangxiong take the lead?
Is the stock price of Yang Zhongli and Shuangxiong plummeting? Should we really step in? Let's see what the market has to say.
Among them, $YTLPOWR (6742.MY)$Yang Zhongli's electrical utilities profit performance is declining by quarters. Most investment banks believe that its stock price trend will also slow down, and have successively downgraded the stock rating to 'hold' or 'follow the market'.
Galaxy Securities analysts pointed out that due to the quarterly decline in profitability contribution of the Singapore subsidiary, Power Seraya, by 18% in the third quarter of the 2024 fiscal year (ending in March), coupled with the expanded losses in the telecommunications business, the net profit of Yang Zhongli's electrical utilities in the third quarter also began to decline from its peak, dropping 16% quarter-on-quarter.
"Power Seraya's net profit performance began to return to normal in the third quarter, while the telecommunications business faced the impact of declining project revenue and widened losses, enough to offset the narrowing losses of Wessex Water Affairs Company, as well as the more profitable contributions from Lianhao Company."
The analyst also mentioned that Power Seraya's electricity retail profit margin decreased quarterly due to supply contract renewals, offsetting the higher electricity sales volume brought by hot weather in the third quarter.
Regarding the outlook, the analyst has not changed the future profit expectations for Yang Zhongli's electrical utilities, still predicting that Power Seraya's profits will continue to fall back to normal levels. However, with the recovery of Wessex Water Affairs performance and the contribution of the datacenter business starting from the second half of the 2025 financial year, it is expected to mitigate the impact of the decline in Singapore's power generation profits.
Overall, the analyst has raised Yang Zhongli Power's target price from the previous 4.50 Ringgit to 5.50 Ringgit. However, due to its stock price having soared by 356% since the beginning of the year, the rating has been downgraded to "hold".
"Power Seraya's net profit performance began to return to normal in the third quarter, while the telecommunications business faced the impact of declining project revenue and widened losses, enough to offset the narrowing losses of Wessex Water Affairs Company, as well as the more profitable contributions from Lianhao Company."
The analyst also mentioned that Power Seraya's electricity retail profit margin decreased quarterly due to supply contract renewals, offsetting the higher electricity sales volume brought by hot weather in the third quarter.
Regarding the outlook, the analyst has not changed the future profit expectations for Yang Zhongli's electrical utilities, still predicting that Power Seraya's profits will continue to fall back to normal levels. However, with the recovery of Wessex Water Affairs performance and the contribution of the datacenter business starting from the second half of the 2025 financial year, it is expected to mitigate the impact of the decline in Singapore's power generation profits.
Overall, the analyst has raised Yang Zhongli Power's target price from the previous 4.50 Ringgit to 5.50 Ringgit. However, due to its stock price having soared by 356% since the beginning of the year, the rating has been downgraded to "hold".
"In our view, based on the current stock price, the market has valued Yang Zhongli Power's datacenter business at 12.5 billion Ringgit. However, the company's datacenter occupancy rates need to increase further before we can reconsider our rating."
According to information provided by Yang Zhongli Power, analysts stated that Sea Ltd officially entered Yang Zhongli Power's green datacenter park on May 10, securing the initial 8 megawatts (MW) of datacenter capacity (Sea Ltd has confirmed a total of 32 megawatts), with the remaining capacity set to be gradually launched between 2025 and 2027.
"As for the remaining 16 megawatts of capacity in the first phase of the project, Yang Zhongli Power is actively negotiating with two potential customers."
She also quoted Yang Zhongli Power as stating that the construction of an additional 100 megawatts datacenter is progressing smoothly and is expected to be completed by the end of this year. The company has also received inquiries from some interested potential customers.
In addition to Galaxy Securities, Maybank Investment Banking and Kenanga Investment Bank have both downgraded Yang Zhongli Electrical Utilities' ratings to "hold" and "follow the market" based on valuation factors, with target prices of 5.20 ringgit and 5.22 ringgit respectively.
Amid the downgrade by various investment banks and the sharp decline in the overnight US stock market, both Yang Zhongli Electrical Utilities and its parent company, Yang Zhongli Institutions, $YTL (4677.MY)$both experienced a significant drop in stock prices this morning.
Among them, Yang Zhongli Electrical Utilities plunged 61 cents or 11.34% to 4.77 ringgit at one point, while Yang Zhongli Institutions fell to as low as 3.53 ringgit, a drop of 35 cents or 9.02%.
The stock price trend of Yang Zhongli Institutions follows that of Yang Zhongli Electrical Utilities.
Galaxy Securities analyst believes that the stock price trend of Yang Zhongli Institutions will follow that of Yang Zhongli Electrical Utilities. Therefore, although the company's profit forecast and target price have been raised to 3.88 ringgit, the rating has also been downgraded to "hold".
"The upcoming high-speed rail (HSR) project will be the biggest bullish factor for Yang Zhongli Institutions in the future, but 72% of this year's forecast pre-tax profit and 51% of the valuation come from the utilities business. Therefore, we believe that the stock price trend of Yang Zhongli Institutions will remain consistent with that of Yang Zhongli Electrical Utilities."
The analyst estimates that the consortium led by Yang Zhongli Institutions is one of the three selected candidates as the contractor for the upcoming high-speed rail chosen by the government.
"We are bullish on the Yang Zhongli Consortium's winning opportunity because the company has been preparing for the Longxin High-speed Rail project since 2009, which gives them a head start. They also have experience in building the Kinmahshi-New Shan Dual-Mode Electric Train and may leverage the existing airport rapid transit (ERL) franchise for cooperation."
Nevertheless, analysts pointed out that it is premature to assess the potential value that the Long Xin High-speed Rail project may bring to the Yang Zhongli institutions until more details about the project are revealed.
"As for the remaining 16 megawatts of capacity in the first phase of the project, Yang Zhongli Power is actively negotiating with two potential customers."
She also quoted Yang Zhongli Power as stating that the construction of an additional 100 megawatts datacenter is progressing smoothly and is expected to be completed by the end of this year. The company has also received inquiries from some interested potential customers.
In addition to Galaxy Securities, Maybank Investment Banking and Kenanga Investment Bank have both downgraded Yang Zhongli Electrical Utilities' ratings to "hold" and "follow the market" based on valuation factors, with target prices of 5.20 ringgit and 5.22 ringgit respectively.
Amid the downgrade by various investment banks and the sharp decline in the overnight US stock market, both Yang Zhongli Electrical Utilities and its parent company, Yang Zhongli Institutions, $YTL (4677.MY)$both experienced a significant drop in stock prices this morning.
Among them, Yang Zhongli Electrical Utilities plunged 61 cents or 11.34% to 4.77 ringgit at one point, while Yang Zhongli Institutions fell to as low as 3.53 ringgit, a drop of 35 cents or 9.02%.
The stock price trend of Yang Zhongli Institutions follows that of Yang Zhongli Electrical Utilities.
Galaxy Securities analyst believes that the stock price trend of Yang Zhongli Institutions will follow that of Yang Zhongli Electrical Utilities. Therefore, although the company's profit forecast and target price have been raised to 3.88 ringgit, the rating has also been downgraded to "hold".
"The upcoming high-speed rail (HSR) project will be the biggest bullish factor for Yang Zhongli Institutions in the future, but 72% of this year's forecast pre-tax profit and 51% of the valuation come from the utilities business. Therefore, we believe that the stock price trend of Yang Zhongli Institutions will remain consistent with that of Yang Zhongli Electrical Utilities."
The analyst estimates that the consortium led by Yang Zhongli Institutions is one of the three selected candidates as the contractor for the upcoming high-speed rail chosen by the government.
"We are bullish on the Yang Zhongli Consortium's winning opportunity because the company has been preparing for the Longxin High-speed Rail project since 2009, which gives them a head start. They also have experience in building the Kinmahshi-New Shan Dual-Mode Electric Train and may leverage the existing airport rapid transit (ERL) franchise for cooperation."
Nevertheless, analysts pointed out that it is premature to assess the potential value that the Long Xin High-speed Rail project may bring to the Yang Zhongli institutions until more details about the project are revealed.
Source of information: Nanyang Business Daily
Disclaimer: This content is for reference and educational purposes only, and does not constitute any specific investment, investment strategy, or recommendation. Readers should bear any risks and responsibilities resulting from relying on this content. Before making any investment decisions, be sure to conduct your own independent research and evaluation, and consult professional advice when necessary. The author and related participants are not responsible for any losses or damages caused by the use or reliance on the information contained in this article.
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